Macromedia Snaps Up Allaire

Macromedia Inc. Tuesday made a $360 million play for Allaire Corp., following a vision of uniting the Web design and Web development communities under one all-encompassing banner.

The deal could tip the scales in the nascent battle over market share in the Web development space that some have seen fulminating between Macromedia and Adobe. Adobe has been moving against Macromedia's Dreamweaver with its own GoLive. But the addition of Allaire could give Macromedia the edge it needs to stay on top.

Macromedia will exchange .2 shares of its stock and $3 in cash for each Allaire share. It will account for the merger as a purchase and expects the acquisition to be accretive in Macromedia's fiscal year 2002. In connection with the agreement, Allaire granted Macromedia an option to acquire 19.9 percent of its stock, exercisable in certain circumstances.

"This merger is a natural," said Rob Burgess, chairman and chief executive officer of Macromedia. "Combining the technology and talent of Macromedia and Allaire will bring Web professionals a complete, accessible way to build engaging, dynamic Web sites and applications. With this merger, we are taking the next logical step in empowering developers to create -- and users to enjoy -- a new generation of compelling Web experiences on everything from personal computers and set-top boxes to PDAs and beyond."

Burgess will continue to serve as chairman and CEO of the merged company, which will retain the Macromedia name. Jeremy Allaire, chief technology officer of Allaire, will take over as chief technology officer of Macromedia, reporting to Kevin Lynch, president of Macromedia products.

David Orfao, president and CEO of Allaire, said the two corporate cultures should integrate without a hitch.

"Allaire and Macromedia share a common vision, business model, and corporate culture," Orfao said. "This merger will bring together complementary products, extensive channels, and first-rate service organizations into a powerful combined company that will lead the Web software industry."

The combined company will have a host of products under its belt, including:

A comprehensive authoring and server product line

Macromedia Dreamweaver, a professional visual HTML editor with more than 70 percent market share

Additionally, the two companies have a combined customer base of more than two million users, ranging from Web designers to application developers to Java programmers.

Macromedia said its first step as a combined company will be to deliver on Allaire's plan to bring the development model of ColdFusion to the J2EE standard, enabling an approachable, productive solution for building applications on the Java platform using technologies like XML and JSP. Its next step will be development of a set of application services -- reusable components and application logic -- that enhance the major software platforms including Java and Microsoft's .NET.

Additionally, the company said it will work towards giving developers an efficient way to develop once for multiple devices and then serve the applications without redeveloping application logic for each device.

"Our combined user communities are at the forefront of defining today's Web experiences," Lynch said. "Together, we will lead the way in constructing the dynamic, multi-device Web of the future, and deliver this across industry standard application servers."

The boards of both companies have unanimously approved the terms of the definitive merger agreement. The deal is still subject to regulatory approvals and the approval of Allaire's shareholders, but Macromedia anticipates closing the deal by the second calendar quarter of 2001.

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